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  Should the Catalyst to Stem the Economic Meltdown be a Stimulus--or a Laxative?
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ECONOMIC ANALYSIS:

Should the Catalyst to Stem the Economic Meltdown be a Stimulus—or a Laxative?

by Fred Cederholm
Help a year down the road does little to warm the hearts of those already unemployed, homeless, medically uninsured, and hungry.
I’ve been thinking about catalysts. Actually I’ve been thinking the unfolding events in DC, public vigilance, our “one song” political parties, stimulus, and laxatives. A catalyst is a re-agent, a substance, or component introduced into a process to accelerate the output/ production to some predetermined end/objective. We need a catalytic intervention now to stem all the negatives feeding our systemic meltdowns, but... should these have the impact of a stimulus, or a laxative?

You see, the coming week is shaping up to be one of those fictitious “make it or break it turning points" upon which "the economic, financial and monetary future of the nation hangs in the balance.” We will see Congress at its best/worst as it wrangles out its “do or die legislation” to fix all that ails us. The Obama Administration is pushing for the TRILLION dollar bailout package that it promised during the transition and wants to sign into law (as in, yesterday). The public has already been treated to the House of Representatives' version, which is a costly abomination of bureaucratic expansion, porcine generosity to the home districts, and earmarked gifts to the various special interests which underwrote this last election cycle. It's payback time! The Senate version should materialize by Wednesday. It will be different, but will carry the same self-destructive baggage. A committee will reconcile the two. The compromise will go to the President for signing on Presidents’ Day—but neither George Washington nor Abraham Lincoln will be honored by the process.

I spent significant web surfing time over the weekend trying to come to grips as to where we are in the unfolding economic, financial and monetary Armageddon. The pace of the downturn is accelerating, but how much further downwards? is the big question. Cost estimates vary by multiple TRILLIONS. Conservatively, some $20 TRILLION in marketable stock values have evaporated from individual portfolios, pension plans, and retirement accounts. At least 18 MILLION homes are sitting empty and languishing on the resale market—more will join them. RE Market valuations have already dropped by some $ 10+ TRILLION. Unemployment/underemployment impacts some 7.4% of the workforce—upwards to 12 MILLION households. These negatives continue to swell. All agree that “something” massive must be done. Problem is what? And... how much of it?

Our two premier political parties have their stock-in-trade solutions, which are surfacing in the present “name that (tune) solution” sweepstakes. The Demos are pushing more and more money into existing (and new) bureaucratic-driven social engineering programs. The across-the-board failures of Lyndon Johnson’s (if you throw enough money at the problems, they will go away) Great Society gives costly proof how such a massive buck-driven assault does not work. The tax-cut scenarios being pushed by the Repubes on the right side of the aisle have little proof going in their favor, either. I mean, just what does George W, “the tax cut king,” have to show US/us now for his 8 years of tax slashing in light of our present malaise and deterioration? Both parties do agree that war is good for business and helps the economy—so don’t expect any peace initiatives, bringing our troops home, or cutting back on any of our global policy initiatives and/or military bases!

All legislative initiatives, government programs, and public or private investment or consumptive spending will take time. Any stimulation via big (make that MEGA) bucks spending will take at least six to nine months to begin to kick in! Unfortunately, help a year down the road does little to warm the hearts of those already unemployed, homeless, medically uninsured, and hungry—much less those destined to join those ranks in the coming hours, days, weeks, and months.

A multi-pronged-solution assault is necessary, but sage caution is a requirement as well.

A multi-pronged-solution assault is necessary, but sage caution is a requirement as well. Some stimulation and seed money is needed, but just how much of our current problems are based in the albatrosses of worth-less (or worthless) security investments, an overbuilt, overvalued real estate inventory, and a staggering burden of fed, state and household debt? Which catalyst will do it? A stimulus? Or, a laxative?

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.


Copyright 2008 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at asklet@rochelle.net.


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This story was published on February 9, 2009.

 

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